Now's the Time to Buy Something

...(I received an) email complaint about my being a broken record in regard to the airlines. It noted that I recommended these stocks at much higher prices and recommended doubling-up half-way down. What can I say? I did recommend the stocks again and again and I still do. I have strongly recommended Continental (CAL) since it was trading around $6 per share in 2002. CAL just reported an amazing quarter (Call Transcript). With oil prices at ridiculously unsustainable levels, the company added about $500 million dollars to its net cash position! How much will it add when oil prices are down?

One of the reasons I write about the airlines so much is because the boom in international travel (still is in its infancy) is part and parcel to this new wonderful economic age that we have entered. A new age that is being totally mis-characterized by left leaning media.

The attitude of the left reflects the short term concerns of the average man, who does not "see the big picture". The huge run up in commodity prices, that is seen as a super negative each time we visit a gas pump, is actually the result of a world wide increase in prosperity. A temporary economic slow down and a temporary time of limited capacity are each masking the long term trend.

Jim O'Neil posted an article at FT.com a day or two ago that you should read. He reports that a Goldman Sachs study shows the world is currently adding 70 million people per year to the middle class. The study suggests that the number will increase to 90 million per year for the next 20 years! From the selfish point of view, these 1.4 billion people being lifted out of poverty will become customers for every thing from Intel (INTC) computer chips to CAL plane tickets.

...American companies such as Texas Instruments (TXN) and INTC produce incredible products. Products that you nor I would have a chance of developing, even if we had a million years to try. The development costs of these products are huge, however, the addition of 70 million new customers each year is resulting in tremendous economies of scale. These huge development costs are extremely small when allocated to billions of units. Suddenly, it has become true that poor people can afford the most sophisticated computers, cell phones and other communication devices.

The left leaning media and politicians look at one end of this process and declare that the CEO is making an outrageous salary. The left falsely cries out that the rich are getting richer and the poor are getting poorer, but, you and I know that the poor benefit the most from new technology. The CEO only gets more of what he already has whereas the poor experience the opening of doors to a whole new world.

...My specialty is a top down view of the world. I do not pretend to be a "stock picker", but I buy what fits my view of the world. I have a long term orientation. I am willing to sacrifice in the short run in order to win big in the long run. I understand that the real estate market is about 5 times the size of the equity markets and as such, the real estate market is the dog and the stock market is the wagging tail. The stock market can jump around but it must follow the dog.

Three years ago, I did not believe that there was time for US officials to take the US into a slow down and have time for a significant recovery before the election. I was wrong. Because high risk mortgages were mixed into batches of low risk mortgages, the FOMC and the Treasury were able to quickly "bust the bubble" of a booming housing market. Seven years worth of slow down has been compressed into three years, with time for improvement before the election.

As a result, there are wonderful buying opportunities. Now is the time to buy resort real estate. While prices and occupancy are low, largely due to high gasoline prices. A turn in the price of gasoline will increase the value of "destination properties". Now is the time to buy high beta stocks, including high tech, banks, consumer discretionary and airlines. The coming recovery in real estate, the happy dog, will be accompanied by stocks, the wagging tail. It is time to "Buy Something"!

Comments

[Alpha Seeker:]

Now is the time to get out of the dollar, before the bear takes another leg down and a few more banks go out of business.

2008 Jul 24 07:53 AM

[Rockstep:]

I like your "big picture" thinking but the one flaw in your argument is in thinking oil prices are going to come down. There may be some temporary drops but the trend is up, up, up.

2008 Jul 24 02:02 PM

[DaveBrit:]

The continual reference to the "left leaning press" is tiresome. Such a sense of victimhood, which completely destroys the desire to read further. The "right leaning" radio waves are equally biased and tiresome, why don't you complain about them? They were gung-ho for this stupid and wasteful war that everyone now hates and which will destroy the GOP in the next election. No I am not "left leaning"....I read the Wall Street Journal, and work with business.

Stop whining and focus on the facts.

2008 Jul 24 02:17 PM

[PeteE:]

The amazing thing about the US economy is despite the real estate meltdown, and the meteoric rise in oil we still have not had a down quarter. The US economy is the most dynamic in the world and adjusts quickly to changing circumstances.

Oil will settle back under $100 and stabilize. The markets will solve the energy problem. Six months from now we will be in a new uptrend. There is a lot of value in the market now.

2008 Jul 24 04:08 PM

[Kunst:]

I recommended these stocks at much higher prices and recommended doubling-up half-way down. What can I say? I did recommend the stocks again and again and I still do.
-- You keep recommending that, will you? Sooner or later, you will probably be right.

... the boom in international travel (still is in its infancy) is part and parcel to this new wonderful economic age that we have entered.
-- Oh yeah, everything is going to get better and better forever. Billions of peole are going to "move into the middle class" and consume like Americans, i.e., 5-10 times as much. Good thing there are no limits on any of this, unlimited stuff for all! Duh.

left-leaning media... left-leaning media...left-leaning media...
-- Who owns the media? A bunch of socialist tree-huggers? More like a bunch of conservative billionaires.

The left falsely cries out that the rich are getting richer and the poor are getting poorer, but, you and I know that the poor benefit the most from new technology.
-- Where do you get this cr*p? Income and especially wealth inequality are at 1920's levels in this country and many others. The poor buy iPhones and Blackberries? Come on! This is ludicrous.

I understand that the real estate market is about 5 times the size of the equity markets and as such, the real estate market is the dog and the stock market is the wagging tail. The stock market can jump around but it must follow the dog.
-- Huh? No sense at all.

The coming recovery in real estate, the happy dog, will be accompanied by stocks, the wagging tail.
-- I guess Prozac solves all problems.

One of the most off-course articles I have ever seen.

2008 Jul 24 06:43 PM

[User 176952:]

Go, look up the Author's articles. Look at how many times the word "Buy" is used in the Tilte since 2007. Every time is a Buying opportunity !! Thank You so much.

2008 Jul 24 10:12 PM

[Charlie Str...:]

Every day there are new opportunities to buy or sell something, but I have to agree with Kunst on every point except that inequality in America is even worse than Kunst suspects as you can see, for example, in this article:

harvardmagazine.com/20...

2008 Jul 24 10:28 PM

[Chuck Kasparov:]

The other flaw in your argument is that the company had a good quarter. Adding $500 million to their cash position from "financing activities" doesn't make a good quarter. They lost money ($3 million).

If they did that every quarter - they would continue to add to their $5.3 Billion in debt, and their $356 million in interest payments per year.

2008 Jul 24 11:16 PM

[joof:]

the writer of theis "piece" show go back on his meds and stay off the Internet

Top down= schizophrenic delusions

2008 Jul 25 04:40 PM

[Old Trader:]

Buy "something"?....Gold, maybe. I'm a long term "investor", but my crystal ball gets all cloudy when I ask it to project out beyond 5 years. One or two of the author's points make some sense on a "super macro" level, but are HARDLY "actionable intelligence".

old trader

2008 Jul 25 05:02 PM

[Old Trader:]

should "Gold, maybe"

2008 Jul 25 05:03 PM

[a. palmer jr.:]

I think if I buy anything, it won't be stocks. I bought three highly recommended stocks (two are oil stocks) and all three are down several dollars from what I paid for them. I think I'll just hold on to what little money I have left.

2008 Jul 25 05:21 PM

[Bulldogjr:]

Invest in airline stocks? This guy needs to heed Warren Buffet's advice and steer clear. Maybe Southwest Airlines is okay as an investment but the rest are collective losers. The airline industry has never made consistent profits since they were deregulated. Buffet said that investors would all be better off is someone would have shot down Orville Wright at Kitty Hawk....

2008 Jul 25 11:00 PM

[bulldogSR:]

Airline stocks are short term money makers....get in and get out. It is not rocket science.

2008 Jul 29 05:50 PM